Court of Appeal to hear appeal by city council in mortgagee exclusion clause case

The case will be heard by the Chancellor of the High Court, Sir Colin Birss, Lord Justice Holgate and Lord Justice Miles. It will be livestreamed.

The High Court’s ruling in Westminster City Council v Gems House Residences Chiltern Street Limited & Anor [2025] EWHC 1789 centred around whether the first defendant, Gems House Residences Chiltern Street Limited, was entitled to claim the benefit of a mortgagee exclusion clause in the s.106 agreement as a person deriving title through a mortgagee of a ‘Registered Social Provider’.

The city council was seeking an injunction order requiring 16 properties in West London to remain affordable housing after the flats were sold on the private market.

HHJ Hodge dismissed the application in July 2025.

The 16 flats are part of a 60-home development in Paddington, which was granted planning permission in 2013.

The permission was subject to a section 106 agreement that required 16 affordable housing units in the development.

In July 2016, all 16 leases for the properties were transferred to Kinsman Housing Ltd (Kinsman), which at that time was a registered provider of social housing.

However, Kinsman was later de-registered by the Regulator of Social Housing in August 2023 after breaching the Governance & Financial Viability Standard 2015.

The 16 affordable homes were then bought by Gems House Residences Chiltern Street for approximately £12.6m.

In April 2024, Westminster sought a declaration that the defendants were bound by planning obligations contained within the s.106 agreement on affordable housing.

The city council also obtained an interim injunction at the time, requiring the flats to be used as affordable housing until the trial.

At the High Court, HHJ Hodge said: "The resolution of this issue depends upon whether the status of the mortgagor as a ‘Registered Social Provider’ (as defined) falls to be determined as at the date the mortgage was created or the later date when the mortgagee sold the leases of all 16 flats to the first defendant.”

The High Court judge ultimately dismissed Westminster's full injunction application, stating: "Not without some regret at the consequent loss of much-needed affordable housing, I have no hesitation in preferring the defendants’ submissions to those advanced on behalf of the claimant."

He also discharged the injunction, which had been granted in October 2024.

Adam Carey